Advice, Community, Mentors

The Next Year (& Beyond) Plan – Part 1

You’ve had a piece of the PIE… Now What?

As this year’s PIE class wraps up it’s official program and settles down to dig in and advance their products and companies, I thought it would be useful to put together some strategies for thinking about the future.

This two part series highlights the more operational areas of growing a company and supporting the product once it’s launched. It is not meant to be a “how to” but a guide to start thinking and planning best and worst case scenarios.

So what’s your first year plan look like? How should you be thinking about it?

There’s no hard and fast rules about “the right” way to grow and maintain a company except that revenue should exceed expenses to be sustainable. A business plan helps, and those of you who are beginning to look at seed investment will need to at least have a cursory version of one.

Operational Forecasting

It takes money (cash) to launch and continue running a company. From the companies I met with at PIE, many were hitting the VC trail to pitch for Seed funding. An important thing to think about at this stage is until the Seed funding comes in where is the cash coming from and how much do you think you need?

Running models which forecast out spend through anticipated Seed then spend once the check has cleared (let’s say a 12mo. cycle) is going to be helpful. On the expense side this includes travel (to pitch), legal fees, marketing efforts, money needed to support the product (hosting, licenses), insurance and current payroll. One of the bonuses of sticking around PIE after the session has ended is free rent, which alone could save your company five figures this year of expenses, so take advantage!

From here, sales/revenue forecasting (being as realistic as possible). Where do customers (or sponsors, advertisers) 1-100 come in, 101-1000, and what would be an average percentage to use for growth? (I use 3% as a safe metric).

Overlay the expense forecast against the revenue one and you’ve got an initial idea of your company’s break even point, operating costs and revenue opportunities.

I also think it’s wise to run a Plan B scenario where the company doesn’t land funding (we all know it happens) or the lead time takes 2-3x longer than anticipated. Can the company quickly produce enough revenue to be sustainable? How does that affect the growth plan?

Understanding both sides of these scenarios will help inform how the company should operate and where there might be major decision factors to consider.

Goals, KPI Creation & Monitoring

With so many moving parts required to operate a business, it’s important to set goals to measure company performance against. These goals, measured over a set time frame will allow founders and the management team to gauge how different areas of the operations are doing.

A couple of examples of goals and their associated KPI’s (Key Performance Indicators) are:
Increase App Downloads 10% in next month. KPI’s could be traffic/user sources, daily downloads, social media mentions.
Increase Sales on Website 20% over a 3 month period. KPI’s could be daily sales, shopping cart abandonment %’s, and competitive pricing.

Setting goals should inform business decisions in areas such as your product, positioning, pricing, traction in the market, customer service and define areas which need help or re-strategizing. KPI’s are used to drive the actions in these areas.

There are several KPI dashboard tools out in the market which could be worth researching and investing in to help.

Hiring

Allison Krug wrote a strong piece about hiring for startups back in September. Areas I think worth expanding upon are:

Inventory the capacity your current team (I know that sounds terribly Dilbert-esq). Are they fully booked with work, and are there opportunities to cross train which would give both the company an additional skill set and the employee a chance to learn something new? Understanding where your team is now and what they can produce informs your product milestones, roadmap and operational capabilities. Running an OPE (Overall People Effectiveness) model, which supports the Lean Startup methodology, is a useful tool to understand the productive %s of your team.

When budgeting for new hires, if they are full time salaried, add ~22% to the market base salary. This will cover the company’s piece of employee taxes, any benefits given plus on-boarding costs (e.g.: a new laptop). Based on the percentage above every 5 hires will cost the company roughly the equivalent of a 6th employee.

One last (potentially eye opening) note about the realities of hiring, once you bring on a hire as an salaried employee (not consulting) the company becomes liable for part or all of their unemployment payments (in Oregon at least) should the employee file within 24 months of working for the company. The company pays into the Oregon Unemployment Insurance fund through their share of the employee payroll taxes, so take Alison’s advice to heart, make sure your hire is a good fit on all sides!

Next post, I’ll cover strategies about product and issues which could affect you as a founder. Other PIE mentors, it would be great to see additional thoughts and input to what I’ve outlined above!


Kris Pennella is a business operations and product strategy consultant focusing on start-ups to mid-size companies, as well as a mentor at PIE. Find her on Twitter: @littlepots or connect with her on LinkedIn.
Advice, Community, Mentors

[Updated] How to hire for cultural fit.

Company culture is all the rage in PDX startup land. It’s incorporated into hiring processes and strategic planning meetings. There are even full time jobs dedicated to ensuring the success of a company’s culture. When you’ve got an intimate staff size that’s in the single or double digits, every new employee makes a difference, shifts the vibe, rocks the boat, changes at least one person’s job duties—all of these hopefully for the better.

Considering the high cost of turnover and awkwardness of employee relations issues, it makes perfect sense why startups place equal if not higher value on a culture vs skillset match. After all, a defining trait of working at a startup is that we hang out with our coworkers both in and out of the office – so these new hires had better be people we love.

The challenge is how do we ensure that we’re hiring someone who has mad job related skills AND will slide seamlessly into our group of crazies. Below are three steps for assessing culture fit and determining just who might be wo/man enough to join your nerd herd.

1) Start with identifying the culture.

Culture means the feel of a business vs the hard facts. Having a solid definition of what it feels like to work there is the first step in making good hires.

How I describe startup culture to friends, family, future coworkers:

  • The 3 C’s. Creativity, curiosity, crazy are required.
  • The 3 I’s. The recipe for a solid foundation is information + innovation = invention.
  • Lovers of ambiguity, hard/unforeseen problems, voicing opinions, post midnight emails work here. Their talent is vast and uncontained. They are inspirational. And they are all hilarious.
  • Recognition for both successes and failures happens on the regular.
  • There may not be a 401k, a career ladder, or even a job description. But employees can wear flip flops, bring their cats to work, come into and leave the office when they feel like it, and the startling abundance of free food and drink correlates directly to the free yoga and exercise options that are part of the total compensation package. Think perks vs benefits.

It’s important to figure out what your culture really is so that you can talk through it with prospective employees. Nothing in place? Start with polling your staff, your execs, people in the community who know you. Ask them how they’d describe the people they work with and the overall vibe. Ask about the perks vs benefits. Ask about what landed them there and why they stay.

2) Follow it up with identifying the true job need.

The focus here is to be adding new positions gracefully, thoughtfully, sustainably—not just because “holy shit we need an Ops guy Dev Ops Hero NOW” that may not be needed in one month. This is important in terms of presenting an accurate portrayal of not only the job you’re interviewing someone for, but a *culture of transparency.

Prep internal constituents:

In order to keep a culture chill. Be as open as possible about the process to alleviate confusion around a hire. Be certain on the full time/part time/permanent/temporary status of a needed position. Talk it over with staff so they’re in the loop on what potential new person may be coming on, and what this will mean for a person/team job-wise. Even the tiniest of heads up can head off staff revolt. This is particularly important for those who will be meeting prospective candidates. The goal is for employees to feel well informed and fully comfortable talking about this new opportunity with the interviewee across the table vs “yeah, I guess we need a front-end dude dude/dudette, that’s what they told me this morning.” Current staff contributes to a big cultural first impression.

External constituents:

Let’s be honest, startup jobs ebb and flow constantly. Re-orgs, or shit—just ‘orgs’—happen all the time. It’s our hiring responsibility to convey the job needed at the time of the interview, discuss potential evolutions of said job, address stability as best we can, and simply put: be transparent.

By disclosing everything we know about an open position at that very moment with staff and candidates, we fill in all of the blanks. This way staff is onboard and willing to participate in the process if necessary, and candidates don’t have to piece together the details of the job, which can breed confusion about the culture. And in some cases even result in declining an offer.

*If being transparent about the job/culture is a challenge – be open about the lack of transparency. No surprises. And then work on improving transparency. That may very well be my next blog post topic…

3) Assessing potential new coworkers.

Ask good questions. Listen listen listen, way more than you talk. It’s amazing what people will say if you just… listen. Have a short list of broad ideas on what you hope they’ll say. Have an even shorter list of dealbreakers. Notice how you feel about each answer, take the occasional note, but see if you can get a good read on your intuitive response to what a candidate is saying and how they are saying it.

A few culture-related questions:

  • Motivation: why are you here? what motivates you outside of cold hard cash? have you ever felt unmotivated – what happened, how did you respond, who besides you was a factor, and what did you learn? what has been your greatest nonverbal reward?
  • Victories and losses: what are some of your greatest triumphs and greatest challenges that you’ve had in your career? how do you know when you’ve nailed it or blown it completely? at what point do you ask for help? what is your recovery process? what is your celebration process?
  • Playing well with others: how would your best and most challenging boss, coworker describe you? list a few characteristics that you need from a boss/coworker that would be a dealbreaker? who have been some of your most inspirational bosses/coworkers, and why? how/when do you know it’s appropriate to speak up, or tag in and help a coworker?
  • The job: what excites you about this opportunity, what made you apply? do any of the responsibilities make you feel anxious, and if so, what would you need in order to feel confident about your ability to handle the job? how does this role compare or contrast to what you’re currently doing, and on that note, what is motivating you to consider new opportunities?
  • Logistics: what would we learn about you in a few months that we wouldn’t know about you on day 1? what is your preferred communication style, favorite color, most influential person in your life? are you a morning person vs night owl? how do you kill time when stranded at an airport?
  • Questions for you: ask them to ask you anything. Hope that they will have something to ask, be ok with if it they don’t. If you’re comfortable with it, share your contact information so that they may follow up with you directly if questions arise post interview.

Making the decision…

Keep it simple. Just like culture is a feel, a candidate will leave you with the same. A feel, a gut vibe response. Remember that they are sizing up potential culture fit as much as you are, so all you can do is present a clear picture of what it looks like at your company and hope for a good match instead of forcing it to fill a role. Take the extra time to ask non job specific questions. Read the resume, check the references. When it comes to give the thumbs up/down, don’t second guess yourself and don’t get bogged down in analyzing or quantifying specifics. *Pay attention and give voice to your gut vibe – it’s (almost) always right. No arguing.

*This applies not only to hiring but to all life decisions.

Update:
Note from the Editor: This post has been edited to suit all audiences, as was the author’s original intent. We believe in the importance of fostering and promoting diversity and inclusion not only at PIE, but in the greater Portland startup community—beards or no beards.

-Kirsten Golden, Program Manager